You’ve got a solid value proposition that you’re confident will generate demand–eventually. You’ve got a whole pile of promotional offers and marketing campaigns ready to be rolled out at opportune times. Your social media presence is gearing up, and all of your launch content has been checked and triple-checked for SEO. Just one question remains to be answered.
Where are you going to sell your products?
On the ground level, it seems like a binary choice. You can either design your own storefront on sites like Shopify or set up a “virtual stall” at an already established online marketplace like eBay, Amazon or even Etsy.
Both approaches have their pluses and minuses, and it’s a decision that should be weighed carefully. Today I’ll be sharing some pros and cons to each method, and share what we currently do at BestSelf Co.
Pros of selling on an established marketplace
Even though sites like Shopify make it possible to create a store within a few hours, it’s still only one part of the puzzle which is why utilizing someone else’s online marketplace infrastructure can seem so appealing.
Between the convenience, streamlined logistics, and quicker access to a larger pool of potential customers there’s a lot to offer.
High traffic channel
With a marketplace you are hooking into an existing traffic machine rather than trying to find customers on your own, which is much harder and more expensive. Amazon is the largest retailer in North America. In fact, as of December 2017 they were getting 197 million visitors per month and eBay had 164 million registered buyers. That’s a TON of existing traffic you can hook into to quickly increase your sales volume.
With your own store, no matter how meticulously your ducks are lined up on launch day, you won’t be drawing nearly as much traffic as marketplaces like Ebay or Amazon do. They’ve had years to become known as world-class online retailers.
New customer acquisition
One of the biggest upsides to an existing marketplace is the fact that it already has an established user base that visit and trust the platform, making the chance of converting them to a customer much higher. This minimizes the amount of work you need to do to get new eyes to see your products.
By selling via a marketplace you will have much more opportunity to reach these new customers who may never have heard of your before.
People tend to shop on well-known marketplaces because it’s safer than other smaller online stores. For example, if I personally have to choose between buying a product on Amazon vs a private online store I’ve never visited before, I’ll choose Amazon every time.
This is because they already have my trust, I know I’ll get what I pay for, and all my information is already stored making it super quick and easy at checkout. By choosing to sell on a marketplace, the existing trust for the platform will be extended to you as a seller right away.
Cons of selling on an established marketplace
Anytime you decide to partner with someone else and buy into the benefits of all the hard work they’ve already done, you’re on their turf, playing by their rules. You are building your house on rented land which has its risks.
This isn’t inherently a bad thing, of course–it just means you’ll need to decide whether the advantages they can offer are worth giving up some control in exchange.
If you’re setting up shop in a popular marketplace, that also means you’re paying them rent. Amazon charges nominal monthly fees in addition to extra fees for each sale, which vary with category and price. These fees can add up to a serious chunk of change over time, particularly for high-volume sellers.
There are downsides to selling your products in a place where lots of other people also sell their products. It’s a digital bazaar with many different products on offer, so while it draws millions of shoppers, it also has millions of products which makes it harder to stand out to these visitors. Once they do find you, you have to entice them as there will be other similar products just a short click away.
As any Amazon seller will tell you, the competition in the world’s biggest online marketplace is fierce, to put it mildly. In order to stay profitable, you’ll need to be prepared to commit a great deal of time and effort to ensuring your products are priced appropriately.
Lower brand equity
Loss of brand equity is another major concern here. The vast majority of online shoppers, particularly on Amazon, don’t go out of their way to look at who they’re actually buying from. Amazon sells products directly from its own warehouses as well, so it’s not only a platform for resellers.
Customers rarely know or care about the difference. To the majority of people, the spiffy running shoes they just bought simply came from Amazon, and they may not even know you exist. This puts a real damper on referrals and word-of-mouth advertising.
If you look at a product listing, you’ll see how small the store name is–no wonder people have no clue they aren’t just buying from Amazon.
Limited customer engagement
When you sell on Amazon, the customers who buy from you are not your customers, they are Amazon’s customers which means you don’t have an opportunity for direct interaction.
This not only means that customer service issues become more cumbersome, it also costs you upsell opportunities if you don’t have a convenient way to offer them through someone else’s architecture. In Amazon’s defense, they’ve made real strides toward facilitating direct communication between buyers and sellers in recent years, but you’re still ultimately subject to the workings of someone else’s infrastructure.
I’ve left one of the most challenging (and in some cases, sinister) aspects of using a marketplace for last. Having your listings hijacked is one of the most aggravating and costly things that can happen to sellers, and it’s a growing problem.
In a nutshell, it usually unfolds as follows: you’re sitting comfortably on your hard-won Amazon buy box, processing mountains of orders every day. But the next time you log in to see how things are going, you discover that it’s been yanked out from under you by someone selling cheap knockoffs for a fraction of the price.
In most cases, their product is demonstrably inferior or even falsely advertised, but buyers won’t know that until they receive the item, and in the meantime you’ve dropped from hundreds of sales per day to zero.
There are ways to protect yourself from this, to an extent, but no approach is foolproof, and most marketplace sellers will experience hijacked listings at one time or another.
This happens because much like the customer not being yours, the listing of the product is also property of Amazon. Yes even if you invented the product and created the listing, other people can still sell on it– which brings me back to the metaphor of building a house on rented land.
Pros of setting up your own online store
Renting space in an existing marketplace is a ton of work, but building your own shop from the ground up is tougher and more time-consuming. Nonetheless, there are still compelling reasons to consider doing it, particularly for long-range endeavors.
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Total control, no (direct) competition
One of the most obvious advantages to striking out on your own is the total retention of autonomy. You almost certainly won’t log as many sales or draw as much traffic in the beginning, but the comparatively modest empire you do build will be all yours.
Plus, if you’re thinking in years and decades (as any good entrepreneur should be), setting up your own shop almost invariably works out better in the long run. With no possibility of hijacked listings or rising seller fees, you’re free to focus more of your energy on your products and customers.
Name and brand recognition
Every self-starter from Bill Gates to a one-man dog grooming operation knows the importance of getting your name or brand out there so that people start to recognize it. In the first months after launching your business, name recognition should be your top priority.
Running your own shop ensures that there’s no question about where your excellent products came from and will do much more to drive your page rankings higher and build a loyal group of repeat customers.
We’re at a point in time where creating a great buying experience has become a necessity, as selling physical experiences has eclipsed the simple manufacturing and selling of products.
When you have your own store you control every aspect of the customer experience, from the website, to the messaging, to the delivery. You can create an experience for your customers that stirs emotions and generates more memories than yet another Amazon delivery will.
You can interact with your customers and cater to their exact needs.
At BestSelf Co we are diligent in crafting a brand and customer experience with our products, from the website to the packaging and even to the packing tape on the box. None of this would be possible via a marketplace.
Increased revenue opportunities through upsells
For most successful ecommerce sites, an enormous portion of revenue comes from upsells, not initial sales to new customers; it’s much easier to show your customers things they don’t yet know they need on your own platform.
With your own store you have complete control over creating upsells and offers for your visitors which can make a huge difference in revenue for your store.
More valuable asset for investors
Finally, investors like to see a confident, assertive operation where one person or one small group is calling the shots (good investors do, anyway). It’s not impossible to find investors willing to sign on with your brand if you’re primarily selling in a marketplace, but it’s a lot easier to earn their confidence if you can show them an in-house setup totally under your own control. Shareholders tend to be a little more skittish when a third party has some degree of power over your day-to-day operations.
Cons of setting up your own shop
While keeping everything in-house definitely has its appeal, it’s not without its tradeoffs. Overall, you’ll be putting in more work and waiting longer for profits, especially in the beginning.
Longer time to revenue and more expensive customer acquisition
There’s a reason successful businesses focus so heavily on customer retention: once you’ve convinced someone that your products are worth buying (more than once, ideally), the hardest part is over. Any new e-commerce site is relatively unknown in its infancy, and you’ll need to sweat a lot harder to get customers in the door. You may linger in the red for months or even years, and you’ll need to be able to handle that without having a panic attack.
If your value proposition is strong, customers will come to you–eventually. It might take a while though, and you should be ready for the long haul.
More (and more complex) logistics
Amazon’s FBA service makes fulfillment so easy-breezy that you’re liable to be completely overwhelmed the first time you try to do it yourself. Setting up your own fulfillment operation isn’t brain surgery, but for first time sellers it’s still an uphill battle when you’re first setting it up.
You’ll also be expected to compete on both speed and price against the big marketplaces as that’s what people have gotten used to, and this makes the challenge that much greater.
There is no one-size-fits-all solution…
…but there is one that’s right for your brand. One of the many reasons capitalism is so fantastic is the essentially infinite number of options available to creative thinkers willing to roll up their sleeves and get to work.
At BestSelf Co, we have our own shop built on the Shopify platform, but we also sell some of our products on Amazon. You may find that a hybrid approach works well for your business, or that a narrower approach is a better fit for your particular brand.
In any case, lots of planning and careful thinking now will save you plenty of headaches in the future.
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